Lenihan 'powerless' to stop AIB paying out bonuses
Published 13/12/2010 | 05:00
THE Government last night said it was powerless to stop the payment of bonuses worth €40m to AIB staff after it emerged the bank did not contest the court case that triggered the massive payouts.
The bank's decision not to defend a case taken by trader John Foy effectively forced the payment of bonuses to senior employees at Allied Irish Banks worth an average of €180,000.
This means the bank, rather than the courts, decided that the bonuses should be repaid.
The revelation last night sparked opposition calls on the Government to withhold the payment of the bonuses.
However, a Department of Finance spokesman last night said Attorney General Paul Gallagher has advised Finance Minister Brian Lenihan he has no powers to block the bank from fulfiling any legal commitment.
Children's Minister Barry Andrews also said the Government could not intervene, despite the latest revelations.
"To be honest, it seems this money will be paid out," he said.
However, Fine Gael communications spokesman Leo Varadkar said AIB could have pleaded inability to pay because it was effectively insolvent.
"I really wonder if these public interest directors are serving the public interest at all," he said on RTE's 'This Week'.
"Most people have had big pay cuts and welfare cuts, paying salary rises to staff and bonuses to bankers; that just is unjust and it can't be tolerated."
Labour Party justice spokesman Pat Rabbitte called for the bank's board, other than recently appointed chairman David Hodgkinson, to be fired until an investigation revealed who was looking after the public interest.
"It seems that Mr Lenihan has once again been caught flat-footed by the chicanery of the bankers," Mr Rabbitte said.
He added Mr Lenihan told the Dail last week that AIB went to the High Court and tried to contest the bonus case.
"Now of course, we know that AIB did no such thing, and that it essentially gave its executives a free pass," he said.
The State only holds a minority stake in AIB, but is likely to own a majority stake early next year.
Both Mr Lenihan and European Commission president Jose Manuel Barroso said last week that the decision was made by the courts.
John Foy, the trader who took the original court case which was heard last month, was awarded €161,000 plus 8pc interest after he successfully argued that he should be paid a bonus for his work in 2008.
Mr Foy, who applied for planning permission in 2007 to convert farm buildings next to his home in Trim, Co Meath, into stables and kennels, told the court he had suffered "unjustified hardship" following the decision not to pay a bonus.
IBOA, the trade union representing staff in the banking sector, said AIB staff had suffered abuse from customers who were annoyed by news of the bonus payments.
"An impression has been created in the minds of many members of the general public that ordinary bank officials in AIB have shared in a massive bonus bonanza -- and once again branch staff throughout Ireland are bearing the brunt of further unjustified abuse and demeaning comments from various quarters."
The vast majority of staff in AIB have not benefited from any such payments, the union added. Fewer than one in the seven staff got any bonus last year and most of those payments were small.
"Our members in AIB are now suffering the consequences of the distorted remuneration policies introduced in AIB over the last decade or so," the IBOA said.
"The excessive pursuit of narrowly focused targets by AIB and other institutions in order to maximise share-holder value in the short-term -- while inevitably undermining the long-term stability of the bank -- lies at the heart of the current financial crisis which has done so much damage to the Irish economy," it added.
AIB has, meanwhile, attracted three bidders for its investment management unit, which is expected to fetch as much as €25m.
Irish Life Investment Managers, Bloxham Stockbrokers and billionaire Dermot Desmond's investment vehicle International Investment and Underwriting, are vying to take over AIB Investment Managers.